By Alice Truong

Hong Kong’s pension plan turned 10 years old this month. But before any candles were blown, the chairwoman of the Mandatory Provident Fund Schemes Authority wished for some changes.

Anna Wu, who heads the MPF Schemes Authority, said last week in a press conference that fees for these retirement plans are too high and argued that they should be lowered. MPF fees average from 0.9% to 2.4% of the amount invested. By comparison, mutual funds in the U.S.’s 401(k) pension plan often charge between 0.25% and 1%.

More than 2.45 million participants have contributed 345 billion Hong Kong dollars (US$44.4 billion) to the Hong Kong government’s retirement system. All full-time and part-time employees on Hong Kong payrolls partake in this compulsory retirement plan, with 5% or their income — capped at HK$1,000 — deducted each month. Employers are required to match contributions one for one. The sum is invested in a variety of funds selected by the employee with different degrees of risk, such as bank deposits (low risk) and stocks (high risk). By comparison, the maximum contribution to Singapore’s retirement plan, the Central Provident Fund, is 20% of an employee’s income, and the employer’s maximum matching level is 15% of the employee’s income.

Calculations by ipac Financial Planning Hong Kong Ltd. show contributing the maximum amount each month from the age of 20 until the retirement age of 65 won’t be enough to live on for nine more years, especially since Hong Kong’s average lifespan is the fifth highest in the world, behind Macau, Andorra, Japan and Singapore.

Singapore’s Central Provident Fund
Established: 1955Coverage for: All temporary, part-time and full time employees who are Singaporean citizens and permanent residentsContributions: 5% to 20% of employees’ income. Employers match 5.5% to 15% of income. Rates are set by
the government, varying depending on the age of the employee.Taxed: Profits and earned interest untaxed. Dividends taxed at individual tax rate, which ranges from 0% to 20% based on income.Fees: Variable from 0% to 6% of net asset valueAge one can withdraw: 55Average Singapore life expectancy: 81.98 yearsMinimum balance upon withdrawal: 123,000 Singaporean dollars (US$93,456)

Comments (4 of 4)

Singapore gives off a vibe of needing to be tamed by a dictator whereas HK gives the impression of grouchy but ultimately calm Cantonese relying heavily on a strong government and police force. I'd rather have HK.

8:15 pm December 9, 2010

LIved in both places wrote:

Family and roots are in Hong Kong but pound for pound, the HK's MPF is a joke compared to SG's CPF. There's little to result after decades of work in Hong Kong which explains much of HK's emmigration to Western countries for their social benefits. If you don't personally save in Hong Kong or actively manage your own wealth during your earning years....good luck. My old Singapore roommate was able to painlessly buy a S$750k property in Tanjung Rhu using his 10 years of CPF as the down payment. It's now doubled in value.

4:10 pm December 9, 2010

Indigo Global wrote:

I would also add that as things stand gains made within MPF are not taxed at 15%. Also whilst 100% of the contribution into MPF is for retirement, on average about 7-8% of the contribution into the CPF goes towards retirement. With that in mind MPF is lower cost and more targeted towards retirement.

3:30 pm December 9, 2010

Singapore CPF wrote:

In Singapore the monthly CPF contribution is only on the first S$ 4,500 and on the first S$ 22,500 of any annual bonus.